House Committee Passes Consumer Agency Bill; Insurers Wouldn't Be Under Its Authority

The House Financial Services Committee -- after several days of debating amendments -- approved the bill that would establish a new Consumer Financial Protection Agency, though insurers would not fall under its authority. On the eve of its passage, an amendment stripped even the limited oversight of insurance from the agency -- an outcome greeted with enthusiasm by insurance industry representatives.

The National Association of Mutual Insurance Companies congratulated the lawmakers on preventing "an unnecessarily duplicative and costly regulatory scheme that would ultimately hurt the very consumers the legislation is meant to protect," according to a statement from Jimi Grande, senior vice president for federal and political affairs. He added, "We wholeheartedly support ensuring that consumers have the utmost protections in the financial services marketplace."

The original version of the bill had stated that the "business of insurance" wouldn't be included in the agency's work -- except for some limited exceptions, including mortgage, title and credit insurance. However, the version that finally passed the committee in a 39-29 vote had been amended to say that all insurance business would be free from the potential new agency's purview.

The Senate hasn't yet produced a matching bill, though senators have said they are working on it -- along with other elements of this session's financial reform effort. Though this House bill has passed the committee, it still faces consideration on the House floor.

The industry had been concerned that the bill's exclusion for the business of insurance wasn't specific enough. And insurance groups had argued that allowing even a limited authority over some areas of insurance was too much, carrying the potential for that authority to creep into other insurance business. Several groups joined together to protest the legislative language (BestWire, July 16, 2009).

The unanimously approved amendment, offered by Rep. Gwen Moore, D-Wis., struck the mention of the mortgage, title and credit insurers and redefined the exclusion for the business of insurance. It cleared any writing of insurance or the "activities relating to the writing of insurance or the reinsuring of risks" conducted by insurance employees. The four-page amendment, championed on the other side of the aisle by Rep. Erik Paulsen, R-Minn., also inserted a specific exclusion for those regulated by state insurance regulators.

Blain Rethmeier, a spokesman for the American Insurance Association, congratulated the committee in a statement, saying the AIA commends the members for "recognizing the difference between insurance and the awarding of credit."

Insurance hadn't been the main focus of the days of committee debate, but it had come up. Rep. Tom Price, R-Ga., defended title insurers at one point. "Those people who are actively engaged in their communities, we're going to expose them to an incredible regulatory burden and incredible cost." He was among many Republicans generally opposing the CFPA. "I have dubbed this the Regulate the American Dream Act," Price said.

Rep. Jeb Hensarling, R-Texas, had said, "Ultimately, what we have is a brand new, large, draconian federal agency" with jurisdiction over "maybe 15% of our economy."

But the bill easily passed. Among its supporters was Rep. Jim Himes, D-Conn., who told its opponents that a no vote would mean they would be "left behind by history."

After the vote, the Consumer Federation of America said it would keep working to make sure the legislation protects against "the sale of credit-related insurance policies that are virtually worthless." In a statement from Susan Weinstock, CFA's Financial Reform Campaign Director, she said, "Financial industry lobbyists, the same people who brought our economy to the brink of collapse, are working against the very people who bailed them out -- American consumers."

Rethmeier defended credit insurance. "The fact that some insurance protection covers risks surrounding a credit transaction does not alter the essence of the product being offered -- a promise to provide protection in the event of a loss," he said.